Mild inflation buys time for RBA
August 31, 2009
A closely-watched indicator of inflation remained unchanged in August on a month-on-month basis, following a 0.9% rise in July.
The TD Securities-Melbourne Institute Monthly Inflation Gauge, a private sector measurement, rose by 1.7% in August from a year earlier, remaining comfortably below the 2-3 per cent band targeted by the RBA.
The data, helped by a strong Australian dollar, suggests that the threat of inflation remains weak, which will enable the RBA to maintain their “emergency setting” of interest rates for at least another month and possibly into next year as well.
“Indeed, the flat August result for the inflation gauge indicates that inflation pressures are more subdued,” Annette Beacher, senior strategist at TD Securities, said.
“(It tells) the market that any RBA tightening is still a long way off. Clearly tomorrow’s RBA meeting will almost certainly decide to leave official interest rates steady at 3.0%.”